The last 15 years we have observed an enormous growth of activity by multinational corporations, as measured by inflows and outflows of foreign direct investment (FDI). On the other hand of world-wide growth, Japan is in the 18th year of stagnation with a prolonged financial malaise. Almost two decades ago, Japan’s phenomenal growth was admired and even feared as unstoppable in the world.
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It is almost shrinking economy. However FDI has grown much faster. The worldwide nominal GDP increased at 7.2 percent per year. Also the worldwide imports grew at 9.2 percent and worldwide nominal inflows of FDI increased at 17.6 percent between 1985 and 1997. In the 80s to late 80s, we have observed Japanese financial bubble which was based on industrial advance after the Second World War. These figures mentioned above prove the new financial investments while Japanese economy was growing rapidly, retained earnings of affiliates, and cross border mergers and acquisitions during grew within 70s to 90s.
In this paper, the “flying-geese” model is useful in capturing the essence of Japan’s successful industrial upgrading and Asia’s trade-led growth against world economies but fails to explain why such success would ever lead to the present economic predicament and still happening especially in China even the world economic crisis. This is because it ignores the institutional, especially financial, underpinning of Japan’s catch-up strategy.
Japanese academic scholars and policymakers came to often described Japan’s industrial advance in terms of the catching-up growth with a model so-called “flying-geese” model. This model was well-used among media also. What were the key enabling institutional features of Japan’s once effective Flying Geese catch-up strategy? How did they function? Why did they come to cause the 1987 – 1990 bubble and the current financial imbroglio? How did Japan increase Outward FDI? How will Japan be “reformed”?
Also by using “Flying Geese model” argues that the conventional Flying Geese model of catch-up strategy, though instrumental in depicting the essence of latecomers’ (notably Japan’s) industrial upgrading and Asia’s trade-led growth, has so far neglected the institutional (especially financial) dimension of such a catch-up, that Japan’s present financial imbroglio is paradoxically the very outcome of its successful Flying Geese strategy that was once pursued under a special set of institutional arrangements after the Second World War – that is, the Flying Geese catch-up regime became soon obsolete and even rigidified over years, trapping Japan in the present financial quagmire, and so far, the reform is, strangely enough, “market driven” in the sense that two key market imperatives — inward mergers and acquisitions (M&As) by foreign investors and the mandate of the Net-Driven New Economy-have begun to compel Japan to remold itself more compatible with the norms of global capitalism.
Mergers and acquisitions (M&A) are a large proportion of the whole especially,
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